In the last decade, the food and beverage industry has shifted tremendously.
Where big brands were once successful, many are now losing market share. Mass market advertisements on TV, in magazines and through coupons used to attract shoppers. But now, many consumers could miss those messages because they are not tuning into those conventional channels as much. Not long ago, an innovative or different product could easily retain its popularity because nothing copied it. Now, grocer's private labels and new competitors are quickly replicating successful products and developing other variations to bring to the market, making the market more of a battlefield.
“It’s a very tricky ride,” Gregory Mann, senior vice president and general manager of emerging brands for data insights firm Catalina, said during a session at Natural Products Expo East in Baltimore last week. “There isn’t a playbook.”
Mann and his colleague Marta Cyhan, who is head of marketing for the company, spoke to a packed room about how products today can navigate the challenges in today’s hyper-competitive marketing environment. More than 1,350 companies — many of which are small brands using the trade show to help gain exposure — showcased their products at the East Coast mega-show last week.
Those companies learned both good and bad news from the presenters at the session. The good news is that consumers are fragmented and willing to try interesting new products. The bad news? The way to target consumers today involves a complex blend of transparency, authenticity, personal stories, tapping into consumer motivation, and personalized messaging — and it has no guarantee of success.
Disappointing sales numbers
While many CPG companies have posted disappointing earnings throughout the last year, the roots of those poor performance results were evident from Mann and Cyhan’s presentation.
Out of all of the products on grocery shelves, 99.3% are ignored by consumers, according to Catalina's research. Only 2% of shoppers drive 80% of a brand’s sales, but just over half of shoppers who once called themselves extremely loyal don’t have the same commitment to certain brands anymore — if they are loyal to any brand on the market at all.
Given such dismal figures, it isn't surprising that the failure rate for grocery products is now as high as four out of every five new items. While products are built out of consumer needs, Cyhan said, it’s difficult to gain the traction needed to sustain popularity. About 11% of people who try a new product once are still engaged with it several weeks later — and just 20% of new products exceed $10 million in sales in their first two years.
Only 11% of people who try a new product once are still engaged with it several weeks later.
Head of marketing, Catalina
The internet, especially mobile devices, has changed everything. Consumers don’t need to see a product in their local stores to know about it and want to try it. The relative ease of breaking into stores with a hot new product also lowers the bar to entry. Today’s consumers do more research on brands, products and ingredients than in decades past. A whopping 94% of consumers say that food transparency is important and impacts their decision to purchase a product or not. Whether a product has healthy ingredients carries a value four times higher than whether the brand is recognized.
So how can new products succeed? It basically comes down to one thing: Whether a consumer will buy the product a second time after trying it once, Cyhan said.
“If you can get them to try your product a second time, they’re likely to come back again,” she said. “The second purchase is almost more important to building the sustainability of a brand.”
Follow the spuds
How can brands get that second purchase to happen? It’s not so easy. Cyhan said the key to success is a good read of shopper insights and analytics through data that's now available.
“What is the value to the end user? Make sure there is an action involved,” Cyhan said. “The success criteria is, how do you create measurable impact that is going to drive shoppers to buy one more item, buy you one more time?”
While many of today’s smaller brands — especially those at Expo East — offer trendy, healthy and functional ingredients, Cyhan and Mann said none of those attributes are necessary for success. One of the more successful small brands that Catalina has worked with is the 60-year-old potato company Idahoan. The brand, known for its instant mashed potatoes, gained 80% of its market share in the last 11 years, Cyhan said.
"The success criteria is, how do you create measurable impact that is going to drive shoppers to buy one more item, buy you one more time?"
Head of marketing, Catalina
How did the company do it? Cyhan said their success came from focusing on the right consumers and giving them a message they respond to.
Consumers looking to research the company online will find an authentic story of Idaho’s potato farmers who create the product on Idahoan’s website. The company works on targeted marketing — ensuring its top consumers are aware of new products it develops. Digital coupons and in-store promotions have helped, as well as pairing suggestions. Previous customers of the brand who have dinner items in their shopping baskets — but no potatoes — may receive offers to buy Idahoan products to complete the meal.
And the company listens to its consumers. When two-packs of their products were selling poorly, they found it was because single millennials only wanted to buy what they needed for dinner that night. Based on that knowledge, the company started selling single-serve packages.
Make data work
Catalina can tap into a vast wealth of shopper basket data. But data is useless unless it’s properly understood and acted upon. Mann said that it’s vital for brands to use data to take action and get consumers to buy products for a second time, but there’s no one obvious way to achieve that.
“It’s more holistic. What are you doing? What’s the truth of the data?” he said. “What is it directionally telling you?”
If enough of the right kind of data is collected, it can be leveraged to tell the story of how a brand is doing well — or priming itself for failure. But not all failure is bad, Cyhan said.
“Sometimes failure is the best indicator of success,” she said. “Why didn’t this work? How can you get it to work?”